ADB to lend $36.8m to country’s first private wind farm

Project, to be completed in 2012, will provide 56.4 megawatts electricity as compared to current 6 megawatts.

KARACHI: The Asian Development Bank (ADB) has announced that it will provide a loan of $36.8 million to help fund the first privately-owned and financed wind farm in Pakistan.

ADB, in an announcement on its website on Friday, said Zorlu Enerji Electrik Uretim will use the loan to install wind turbines to increase the output of its wind farm, located in Sindh, from the current six megawatts to a total of 56.4 megawatts.

The output from the plant will provide much-needed additional power, improve the country’s energy security and lower reliance on fossil fuels.

“Acute energy shortages, caused by low investment, are cutting into Pakistan’s economic growth,” said Michael Barrow, Director in ADB’s Private Sector Operations Department.

Pakistan relies heavily on imported fossil fuels for the bulk of its energy needs. However, this is costly, puts a heavy burden on foreign exchange reserves and leaves the country vulnerable to supply disruptions and global price fluctuations.

Investment in new capacity has lagged, whereas demand has surged by over 40 per cent over the past five years, resulting in regular brownouts in all major urban centres and the introduction of power rationing. This has forced shops and industries to close early, undermining the economy.

The government is now engaged in a major drive to expand its energy sources, including tapping renewable energy resources such as wind, given around 50,000 megawatts of capacity is available in the south of the country alone.

“We estimate that three to five projects will come on line following ADB’s support for Zorlu Enerji’s wind farm,” said Siddhartha Shah, senior investment specialist in the Private Sector Operations Department.

Zorlu Enerji, listed on the Istanbul Stock Exchange, owns and operates Turkey’s largest wind farm. It is 68 per cent owned by Zorlu Holding AS, one of the largest conglomerates in Turkey.

The existing six-megawatt wind farm project is currently dispatching power to the Hyderabad Electric Supply Company. Once the second construction phase is complete – expected in 2012 – the 56.4-megawatt wind farm will supply power to the national grid through a 20-year take-or-pay power purchase agreement with the National Transmission and Dispatch Company.

The approved tariff will ensure that the electricity is priced competitively, with the rate dropping over time as project debt is paid down.

“The project will have multiple benefits including helping realise the government’s target of six per cent renewable energy in the total power mix by 2030, and contributing to employment opportunities and economic growth,” said Shah.

The total cost of the project is $147 million with 30 per cent financing through equity provided by Zorlu Enerji and the rest through US dollar-denominated loans from ADB, the International Finance Corp, the ECO Trade and Development Bank and a rupee loan from Habib Bank. ADB’s loan will carry a tenor of 12 years with a two-year grace period.

Published in The Express Tribune, February 5^th, 2011.